Cites New Study Showing Cap Plan Leaves Out Many Middle-Class Taxpayers, Contrary to Claims of House Plan Supporters

WASHINGTON – Americans Against Double Taxation (AADT) today sent an open letter to House members calling the plan to cap the property tax deduction in H.R. 1 a “phantom deduction.” The letter highlights how the so-called compromise on property taxes would be of no value to most middle class taxpayers who itemize today, according to a new analysis from the Institute on Taxation and Economic Policy (ITEP). The ITEP paper, which uses New Jersey as an example, concludes that 12% of New Jersey state residents would see their tax bills rise next year, with that figure growing to 27% by 2027, because the changes in the standard deduction do not offset the adverse impacts from the loss of most of the state and local tax (SALT) deduction.

The letter, written on behalf of a broad coalition of state and local government organizations, service providers and other stakeholders, says “[t]here is a widespread misunderstanding of the impact of the $10,000 property tax limit in the current version of H.R. 1 that needs to be corrected.” It goes on to explain that “nearly 1 million of the state’s households [in New Jersey] will no longer claim the property tax deduction under the House plan, a reduction of 60%, even with the allowance for a $10,000 deduction for property taxes.”

Bob Chlopak, Co-Director of AADT, said: “Middle-class homeowners are being sold a bill that doesn’t do what its supporters say it does. Most middle-class homeowners will get no benefit from the property tax cap because they will no longer itemize, and a significant number will get hit with a tax increase. Members of Congress who are telling their constituents that the property tax cap protects them are misrepresenting this phantom deduction.”

The ITEP report explains how many current taxpayers who claim the property tax deduction would get no benefit from the new House plan. “Despite having property taxes that could potentially be deducted under the House bill, many of these taxpayers would not deduct those taxes in practice because the combination of itemized deductions they are allowed to deduct (which would no longer include state income and sales taxes) would be smaller than the standard deduction.”

The coalition letter concludes by saying that the claims by advocates of H.R. 1 “completely ignore[s] how the House plan works for real taxpayers. It is a false representation about a phantom deduction for the middle class. Before suburban homeowners are hurt by this phantom deduction, or Members see this compromise eviscerated by the Senate tax bill, House Members have an opportunity to protect SALT fully on the House floor.”

Americans Against Double Taxation is a coalition of state and local government organizations, service providers and other stakeholders dedicated to protecting the state and local tax deduction (SALT), a federal tax deduction claimed by 44 million American taxpayers that supports vital investments in infrastructure, public safety, home ownership and education.For more information, visit AmericansAgainstDoubleTaxation.org.